Opportunities ofPlatform Reuse inMalaysia

Developing these fields in

an economically attractive

manner is often challeng-

ing, as they need the same

expensive infrastructure

as large fields, while the

expected revenue streams

are smaller due to the

smaller reserve sizes.

Hence, platform reuse

could be a viable solution

to marginal field

development in Malaysia.

The practice of reusingoffshore platforms in mar-ginal fields is not a novelone outside of Asia. It hasbeen proven that reusing aplatform which is stilltechnically efficient afterits intended service life-span benefits the econom-ics of a field development.Additionally, the use ofrefurbished topsides onfields with lower capacity

As the third highest oilreserve holder in AsiaPacific, the total reservesin Malaysia amounts toapproximately 21.4 billionboe as of January 2012.Of this volume, a signifi-cant proportion (580mboe) is found in a total of106 marginal oil fieldsand PETRONAS has firmplans to develop a quarterof these fields. Each mar-ginal oil field has reservesof 30 million boe or lessand is commercially vi-able when oil prices are atUS$55 to US$60 a barrel.

Marginal oil fielddevelopment is governedby risk service contracts(RSC) instead of the

common productionsharing contracts (PSC).Under a RSC,PETRONAS owns themarginal oil field and allof its production. The feeessentially covers the con-tractor’s expertise in de-veloping the field andextracting of oil. In addi-tion, the developers willbe rewarded with a“performance bonus”,which will be capped at acertain level.

To further enhance thecommerciality of thesedevelopments, a new setof tax incentives has beenput in place. Followingthese incentives;PETRONAS has thus farawarded two marginalfield RSC, valued at RM5.4bil in 2011. Recently,the third RSC for the de-velopment of the Kapal,Banang and Meranticluster of small fields wasawarded.

Opportunities of Platform Reuse in MalaysiaBy K.L. Na, N.A. Wan Abdullah Zawawi,

M.S. Liew (Universiti Teknologi PETRONAS), & Z. Abdul Razak (PETRONAS)

Bulletin3 September 2012

than that from the originalplatform eliminates theneed for major processupgrades or modifica-tions. Given the currentsteel prices and fabrica-tion charges of a new plat-form, reusing a platformcan save up to 40-50% ofthe facilities and lead time-savings costs.

After the success of the

first platform reuse award

in Asia Pacific for the

Balai cluster fields, it is

foreseen that this concept

will gain more approval in

this region given the sig-

nificant number of aging

platforms heading for

decommissioning here.

In conjunction with this, itis essential to focus onmatching the supply ofdecommissioned plat-forms with the need forstructures in new marginalfield projects in Malaysia,if not, the whole of AsiaPacific.

Issue 3, Year 2012

“The new fielddiscoveries and theefforts on en-hanced oil recoveryand marginal fieldsare already showingrenewed interest andattracting investmentsin Malaysia’s up-stream sector.Ultimately, this willresult in a more robustindustry, creatingmore spin-off benefitsto local serviceproviders.”

- PETRONAS in an interviewwith PEMANDU

Date Field/Cluster

Substance ContractValue

International OilCompany

MalaysianContractor

31 Jan 11 Berantai Gas USD 800mexcluding

FPSO

UK’s Petrofac (50%) Sapura Kencana(50%)

16 Aug 11 Balai Oil andGas

USD850m-950m

Australia’s Roc Oil(48%)

Dialog (32%),PCSB (20%)

6 Jul 12 Kapal,Banang,Meranti

Oil Undisclosed Thailand’s CoastalEnergy (60-70%)

Undisclosed

Table 1: RSCs awarded so far

another look.

It is a potentially large

market in which there are

no current local players.

With the right engineering

solutions and technology

development, local ser-

vice providers are able to

develop this new market

regionally.

The article represents thepersonal views of the author(s) and is not in any wayaffiliated to any associations.This series of articles aims topromote awareness in de-commissioning and explorethe many end-of-life alterna-tives of an offshore platform.

References:

CIMB Bank Berhad. (2012). Oil& Gas - Equipment &SVS

Orlando, D., Mullett, C. &Suarz,S. (2012). Recycled PlatformsImprove Economics. HartEnergy, Houston.

Quah, H.W. (2012).PETRONAS – The X Factor.Malaysia Equity Research.Hwang DBS InvestmentBank Berhad

The Star. (2012). JP Morganupbeat on Malaysian marginaloil fields.

Benefits of ReuseThe energy conservationachieved through reusingof a platform and the en-vironmental benefits ofcomplete removal makereuse politically andenvironmentally accept-able business opportunity.

A platform could be givena new life by refurbishingit for installation at a newdevelopment. Decommis-sioned platforms couldalso be modified for usageon other fields and sec-tors. Reusable equipmentcould be traded and re-used, rather than simplyscrapping it. Moreover,the extensive use of liftingbarges and vessels offersmuch opportunity for themaritime sector. Thesepotential economic bene-fits suggest that this sectoris not one that should bedismissed.

Apart from financial trade-offs, considerable bene-fits come from safety andenvironmental aspects,such as; reduced environ-mental impacts due to theabsence of onshore

scrapping, reduced safetyconcerns as most disman-tling and refurbishmentworks are done onshoreand extended life cycle ofcomponents.

Many foreign companieshave realized the potentialof selling reusable plat-forms and the market issuch that there are nowsuccessful platform bro-kerage websites, tradingplatforms facilities andequipment between in-vesting middlemen,brokers and end-users.

The way forwardDecommissioning, untilrecently, was a part of theindustry that receivedlittle attention as thereappeared to be no benefitsto it.

Given the rise of marginalfield development as oneof the ETP initiatives putin place to unlock the nu-merous reservoirs in theMalay basin and impedethe country’s productiondecline, focus on the plat-form reuse market in theregion should be taken

Berantai Field Balai Cluster Fields

Duration 9 years 15 years

Development 1 well head platformwith 18 wells tied to

existing platform,1 FPSO

Predevelopment phase for 18 months beforedevelopment phase (installation of platforms, tie in

to existing infrastructure)

Target First gas by Dec 2011 Within 24 months upon commencement ofdevelopment phase

Table 2: Malaysia First two RSCs awarded in 2011. Note that the development of the Balai Cluster involved

the use of a refurbished platform

Table 3: Summary of selected worldwide decommissioning reference data